TRELLEBORG, Sweden—Trelleborg A.B. has reported weak results for the third quarter of 2020 and expects a "tougher climate" in the final quarter of the year, as new COVID-19 restrictions are imposed in various countries.
During the three months to the end of September, group sales declined 12 percent to $870 million, reflecting a 7 percent decline in organic sales and a 5 percent negative impact of exchange rates, CEO and President Peter Nilsson said Oct. 27.
EBIT (excluding items affecting comparability) fell 4 percent during the three-month period to $113 million, corresponding to an operating margin of 12.9 percent, up from 11.7 percent last year.
Over the nine months to end of September, sales fell 10 percent to $2.8 billion, while EBIT declined 13 percent to $350 million.
Trelleborg Industrial Solutions' sales decreased 14 percent to $260 million during the third quarter. Segment EBIT decreased 9 percent to $29.6 million, due mainly to lower volumes.
However, Nilsson said, the unit saw sales to most market segments "continue to recover."
"Deliveries to the automotive industry made a strong recovery and sales of our marine solutions grew somewhat," he said.
Trelleborg Sealing Solutions' sales to the aerospace industry continued "a very negative trend" due to the pandemic, with deliveries to the segment halved compared with a year ago.
TSS reported a 32 percent decline in EBIT to $51.3 million, on 16 percent lower sales at $282 million for the three months.
According to Nilsson, the business unit's sales to both general industry and the automotive segment improved during the three-month period, compared with the sharp fall during the second quarter.
China "stood out, in particular, with a positive trend," he said.
Sales within Trelleborg Wheel Systems made "a strong recovery and displayed slightly positive growth overall."
Despite a 1 percent organic growth, overall sales were down 5 percent to $226 million, due to structural changes and currency effects.
Nilsson linked the growth primarily to deliveries of agricultural tires, both to OE manufacturers and aftermarket sales.
Sales of tires for material handling and construction vehicles remained weaker compared with the year-earlier period.
TWS also saw EBIT improve 84 percent to $30.7 million, as a result of "strict price and cost discipline and measures to offset COVID-19 effects."
The comparison period in 2019 was also characterized by a lower rate of production aimed at adjusting inventory levels.
Organic sales in "Businesses Under Development" declined, although the trend was more positive compared with the preceding quarter. This was mainly attributable to the favorable development in its offshore oil and gas operation.
Commenting on the results, Nilsson said demand improved gradually in most market segments during the quarter.
However, there was "considerable uncertainty" regarding COVID-19 developments and further consequences of the pandemic as new local restrictions are being imposed across the globe.
"We foresee a tougher climate during the fourth quarter of the year, not least in the oil and gas segment, and a recovery in the aerospace segment will not occur until further into the future," he said.
Trelleborg's general assessment is that demand for the fourth quarter will be on a par with the third quarter, Nilsson said.